Peter Thiel: Bubbles and Bust Theories

Peter Thiel: Bubbles and Bust Theories Thursday, November 6, 2008

Posted by ei-forum in Miscellaneous.
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boom Most of you might remember Peter Thiel from PayPal, which he founded and later sold for 1.5 billion dollars to eBay but Mr. Thiel is also the founder and manager of Clarium Capital Management, a San-Fransisco-based global macro hedge fund. We came across him in one of the Chapters of ‘Inside the House of Money’ which we recently reviewed: here. He is definitely worth listening to and here is a presentation where he discusses the most common theories behind bubbles and busts and offers his own view too.

We don’t want to spoil the video but for those of you who prefer a quick recap of the bubble and bust theories he discusses:

Traditional ‘left-wing’ view: they are basically driven by reckless lending, lack of regulation and greed, therefore leading to an escalation of unsustainable leverage
Traditional ‘right-wing’ view’: they are driven by the reckless behavior of the borrowers with greedy and shortsighted views on taking on too much credit
The truth could be somewhere in the middle > a combination of the above: common theme is probably greed…
Theil’s own view: there has not been enough real growth in the economy. Ultimately, the rate at which science and technology are progressing has not lived to to expectations and hype… we will need to tackle this and see real / sustained growth in productivity to be able to sustain the next ‘bubble’….